Last Eurogroup for Greece resulted in a non-agreement

Emblem of the European Council. Picture credit: Wikipedia

As is often the case with the eurocrisis, after yet another high-level meeting European politicians will parade before the public some 'decisive' agreement they have reached. The last episode in this series is the November 27 Eurogroup statement on Greece. For an inattentive reader the text appears to present a political agreement that sets the basis for a gradual but definite solution to the diplomatic dimension of the Greek crisis. In other words, one not paying attention to the actual wording of the text will discern that Euro-area leaders have managed to make a first step in overcoming the shortcomings of decision-making at the European level combined with the architectural flaws of the monetary union. While today and perhaps the days ahead, we will once again witness an orgy of pompous remarks on how critical this latest decision is; we must remain indifferent to the plethora of misleading commentary which will aim at obfuscating the plain fact that no tangible agreement was ever reached. A judicious interpretation of the actual text reveals that there 'might' be a change in certain parameters, 'provided' that some strict and rigid conditions have been met. The only aspect of the bailout programme to Greece which is clearly reinforced is the monitoring of the implementation of the Memorandum of Understanding, but this too was effectively agreed in prior.

As a matter of fact let us read through the text, starting from the issue of supervision. The Eurogroup statement notes that (emphasis mine):

The Eurogroup noted with satisfaction that the updated programme conditionality includes the adoption by Greece of new instruments to enhance the implementation of the programme, notably by means of correction mechanisms to safeguard the achievement of both fiscal and privatisation targets, and by stronger budgeting and monitoring rules. Greece has also significantly strengthened the segregated account for debt servicing. Greece will transfer all privatizations revenues, the targeted primary surpluses as well as 30% of the excess primary surplus to this account, to meet debt service payment on a quarterly forward-looking basis. Greece will also increase transparency and provide full ex ante and ex post information to the EFSF/ESM on transactions on the segregated account.

Ignoring the fig leaf of 'transparency' that was added to the above paragraph, this part of the text suggests two things:

1. The conditionality of the programme has been strengthened which means that non-elected technocrats will have a stronger say on Greek internal affairs. Also it is tacitly understood that if for whatever reason, be it external shocks, internal economic weaknesses, or even failure of the Greek government to implement the measures it agreed to, the now-common horse trading at the Eurogroup or European Council will start anew, reinvigorating the sentiment of uncertainty over the case of Greece. Payments may be delayed once again, new measures may be required to meet whatever chimerical targets and in general we will all bear witness to the kind of European politics that has thus far exacerbated the crisis, rather than contribute to its effective and benign solution.
2. All the looting of Greek public property, under the corporate-capitalist doctrine of ad hoc privatizations (which have absolutely nothing to do with genuine free markets), will be conducted for the sake of servicing the debt; a debt whose legitimacy remains in question as there has never been a thoroughgoing audit to see what part of it was the product of corruption, while also a great portion of it derives from the funds the Greek state has provided to the domestic banking system (putting the entire bill on the citizen/taxpayer). The serious political and moral objections to such an outright injustice notwithstanding, it is crystal clear that this is an economically unproductive or even counter-productive approach, for it channels valuable funds into areas that can yield no returns whatsoever and which may only succeed in restraining the real economy and in preserving the zombified status of Greek banks.

Proceeding into the nub of the issue, the actual non-agreement, we read the following in the Eurogroup's statement (emphasis mine):

Against this background and after having been reassured of the authorities' resolve to carry the fiscal and structural reform momentum forward and with a positive outcome of the possible debt buy-back operation, the euro area Member States would be prepared to consider the following initiatives:

• A lowering by 100 bps of the interest rate charged to Greece on the loans provided in the context of the Greek Loan Facility. Member States under a full financial assistance programme are not required to participate in the lowering of the GLF interest rates for the period in which they receive themselves financial assistance.
• A lowering by 10 bps of the guarantee fee costs paid by Greece on the EFSF loans.
• An extension of the maturities of the bilateral and EFSF loans by 15 years and a deferral of interest payments of Greece on EFSF loans by 10 years. These measures will not affect the creditworthiness of EFSF, which is fully backed by the guarantees from Member States.
• A commitment by Member States to pass on to Greece's segregated account, an amount equivalent to the income on the SMP portfolio accruing to their national central bank as from budget year 2013. Member States under a full financial assistance programme are not required to participate in this scheme for the period in which they receive themselves financial assistance.

The Eurogroup stresses, however, that the above-mentioned benefits of initiatives by euro area Member States would accrue to Greece in a phased manner and conditional upon a strong implementation by the country of the agreed reform measures in the programme period as well as in the post-programme surveillance period.

The adequacy of the list of proposed measures is of no interest to us within the context of this article, for it is evident that these are mere points for consideration and further bargaining. From the wording of this part of the Eurogroup statement it is readily apparent that ambiguity and vagueness have been intentionally introduced to allow a great deal of flexibility to all parties involved in the Greek bailout, in an effort to keep the pressure on the Greek government without making any actual commitments. Towards that end, the last paragraph of the above quote is quite explicit in the caveats it introduces. To recognize them requires no legal shrewdness nor hermeneutic creativity, but a mere sense of suspicion that stems from the realization of the inconclusiveness of European politics in general and Eurocrisis (mis-)management in particular.

More periodic reviews will follow, additional divergences in opinion will appear, new obstacles will arise along the way. Greece as well as the rest of the Eurozone are in fact suffering from a systemic incompetence of the political order of Europe, found in the overall complexity of institutional and structural flaws in the EU in general and the Euro area in particular.

From my side, I am convinced that we are nowhere near a political solution. In the meantime we see the entropy of the Greek society, while the eurocrisis deepens in many other countries until it eventually reaches the European core. Without a radical shift in approach, European politics will remain part of the problem rather than the solution to it.

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